Yet another HC upholds Service Tax on Renting; Levy and Retrospective Amendment not Unconstitutional
RENTING of any property ipso facto would not amount to service for the purpose of service charge. The Revenue also accepts this. However, in case of renting of immovable property, if service recipient uses it in the course of or furtherance of business or commerce, it can safely be stated that the service provider has rendered service, enabling the service recipient in value addition. Thus, if renting of immovable property is made in the course of or for furtherance of business or commerce, value addition is made by service provider in favour of service recipient. Such activity undertaken by the service provider for value addition in the course of or for furtherance of business or commerce, i.e. to carry on activity or business or commerce of the service recipient amounts to rendition of service and will fall within the meaning of definition of 'service tax'. Sec.65[105][zzzz] of Finance Act, 1994 as amended by Sec.75[5][h] and Sec.76 of the Finance Act, 2010 upheld.
So far, all the High Courts have upheld the levy as well as retrospective amendment. The Delhi High Court is yet to give its judgement, but in view of the judgements of several High Courts, can the Delhi High Court judgement be different? Now, the scene is sure to shift to the Supreme Court, but the preserving litigants will ultimately end up paying the tax with interest and maybe even penalty, while the lawyers will smile all the way to the banks. There is really no point in challenging a levy – the ultimate winner is the Government.
We will bring you this case tomorrow.